Exide bonds fall on "going concern" warning; other auto names' bank debt, bonds firmer

By Paul Deckelman and Sara Rosenberg

New York, June 28 - Exide Technologies' bonds were seen sharply below recent levels Tuesday, after the Lawrenceville, N.J. -based maker of automotive and industrial-use storage batteries said that its auditor would attach a "going concern" warning to the company's upcoming 10-K annual report, which would trigger a credit facility default.

But Exide was the exception to the rule in the autosphere Tuesday, as bank debt and bonds of such issuers as Collins & Aikman Corp. and Visteon Corp. were seen having firmed, in line with a rise in the shares of General Motors Corp., Ford Motor Co., and the two auto giants' various component suppliers, on lower crude oil prices.

Crude - which spiked up to closing levels above $60 per barrel for August delivery of light sweet crude for the first time ever on Monday - tumbled from that peak to $58.20 Tuesday, down $2.34 on the New York Mercantile Exchange, as oil traders took profits ahead of the upcoming holiday weekend and a scheduled inventory report Wednesday that is not expected to keep prices rising.

That's considered very good news for the battered auto sector, led by GM and Ford, which have seen a fall-off in sales of their pricy, high-profit SUVs, pickup trucks and other large vehicles as gasoline prices shot through the $2 per gallon mark earlier this year and kept right on rising.

That good news, though, failed to help Exide, whose 10½% notes due 2013 ended Monday at 78 bid, 80 offered, fell as low as 76 bid, 78 offered Tuesday, before bouncing off the low to end at 77 bid, 79 offered, a trader said

A market source at another desk saw the bonds at 76, and noted that just recently, they had been as high as 81.

The company said Monday that its independent auditor, PricewaterhouseCoopers LLC, will include a "going-concern" opinion in Exide's 10-K report for the 2005 fiscal year that ended on March 31, centering on Exide's ability to meet financial covenants in fiscal 2006 under its credit agreement. Issuance of such an advisory will constitute a default.

Exide said in its statement that it is working with the agent for its bank group to obtain a waiver of the default, but could give no assurances that it will be able to obtain a waiver. It added that it will not be able to make further borrowings under its credit agreement until a waiver is obtained.

Collins & Aikman loans, bonds better

But while Exide seemed to be skidding lower, the other automotive names were traveling in the fast lane Tuesday. The segment continues to be a large focus for distressed loan market participants, with Collins & Aikman's bank debt gaining about two points and Visteon Corp. and Meridian Automotive Systems Inc., although unchanged, seen quite firm in terms of bank debt levels.

"Ford and GM were much stronger on the high-grade side today, so it puts more focus on some of our names," a loan trader explained.

For instance, Collins & Aikman's bank debt was quoted at 74 bid, 76 offered by the end of the day, well up from previous levels of 72.5 bid, 73.5 offered. A trader explained that the paper started to regain some ground after last week's awful 15 point-plus fall because "more buyers are coming in."

And even as the Troy, Mich.-based automotive interior components maker's bank debt was better, its bonds also firmed, with one market source quoting its 10¾% senior notes due 2011 as having moved up to 28.25 bid from Monday's close at 26.75. Its 12 7/8% subordinated notes due 2012, which had fallen as low as 2½ cents on the dollar Monday, moved back up to around four cents on Tuesday.

Another trader saw the subordinated bonds trade as high as a nickel on the dollar, before closing at 4.5 bid, 5.5 offered. The senior bonds, he said, had gained two points to 28 bid, 29 offered.

Another trader saw the senior notes at 27 bid, 28 offered, not much changed on the day, but opined that "there was some volatility. In the morning, there were better sellers. [The bonds] probably traded as low as 25-26ish. Then they firmed back up throughout the day."

The Collins & Aikman bonds and bank debt had fallen sharply last week in the wake of a call the company held with its bank lenders, which market participants suggested had not gone well. Some indicated that the company had warned that its annual EBITDA for the year would come in under the $200 to $225 million originally predicted. Others attributed the slide to market jitters amid the company's filing of an emergency motion last week with the bankruptcy court overseeing its reorganization, seeking approval for short-term unsecured financing from its lending customers to tide it over until it can access the remaining $150 million of its debtor-in-possession financing. Collins & Aikman said it needed that bridge financing in order to continue operations and meet its working capital needs. However, the decision by bankruptcy judge Steven W. Rhodes late Thursday granting its motion and approving the bridge loans, which was not widely known until Monday, was apparently seen by the financial markets Tuesday as a reassuring development, with the company's immediate short-term liquidity problem solved, for now.

Visteon, Meridian gain

Meanwhile, the bank debt and bonds of other auto names were up as well. Visteon's bank debt was quoted firm at 99.5 bid, 100.25 offered, while its 8¼% notes due 2010 improved to 92 bid from 90.5 Monday and its 7% notes due 2014 were nearly a point higher, at 81.5

On Monday, Visteon - a Van Buren Township, Mich.-based auto components maker and former unit of Ford - announced that it closed on a new $300 million secured credit agreement due Dec. 15, and amended and restated its existing $775 million five-year facility and $250 million delayed-draw term loan to reflect terms and conditions substantially the same as the new facility.

Furthermore, bank lenders agreed to give the company until Dec. 10 - as opposed to the previously agreed upon July 29 deadline - to provide financial statements for accounting periods, including first quarter 2005 results.

Lastly, limits on consolidated leverage ratios were raised for the remaining quarters of 2005, then will gradually decrease in subsequent quarters.

Meridian Automotive Systems' first-lien bank debt was also labeled as firm at 90 bid, 92 offered, a debt trader said. The Dearborn, Mich.-based components supplier is in the process of seeking court approval for a newly amended $75 million debtor-in-possession financing facility via Credit Suisse First Boston.

Northwest, UAL higher

Outside of the automotive area, a trader saw Northwest Airline Corp.'s 9 7/8% notes due 2007, its 7 1/8% notes due 2008 and its 10% notes due 2009 all a point better Tuesday, finishing at - respectively - 53 bid, 54 offered for the '07s, 44 bid, 45 offered for the '08s and 45 bid, 46 offered for the '09s. He also saw the Eagan, Minn.-based Number-Four U.S. airline carrier's 8 7/8% notes due 2006 at 67 bid, 68 offered, up two points on the day.

He also saw bankrupt United Airlines' corporate parent, UAL, at 12.5 bid, 13.5 offered, after having fallen to 11 bid, 12 offered previously.

But he saw Delta Air Lines Inc.'s 8.30% notes due 2029 unchanged at 26 bid, 27 offered, and the Atlanta-based carrier's flagship 7.70% notes due 2005 at 88 bid, 89 offered, down a point on the day.

The Northwest bonds were seen better bid for in line with a rise in the shares of Northwest and other airline operators on Tuesday, in response to the sharp pullback in crude prices from the $60 per barrel level seen Monday.

The movement of crude prices, which have risen to historic highs, are seen as a leading indicator of the likely direction of jet fuel prices going forward.

"Oil was off $2.34 today [Tuesday]," said airline analyst Ray Neidl of Calyon Securities, "and you saw what happened to the airline stocks - they were up bigtime. Oil is the second-biggest cost factor as far as operating costs go, and the high fuel costs are having a devastating impact on the industry."

Neidl projected that "if oil were to come down 20%, you might have some of these carriers actually returning to profitability" - but he added that such a scenario is very unlikely to happen, "and that's why most analysts are predicting losses this year and next year for most of the airlines."

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